Centerpoint Energy, Inc (holding Co) · NYSE:CNP
Centerpoint Energy, Inc (holding Co) — Q2 2019 Earnings Presentation
36 slides from Centerpoint Energy, Inc (holding Co)'s earnings presentation, Aug 7, 2019
Slide 1: 2nd Quarter 2019 Earnings Call
2ND QUARTER 2019 EARNINGS CALL AUGUST 7, 2019
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT This presentation and the oral statements made in connection herewith contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical f
Slide 3: Additional Information: Use of Non-GAAP Financial Measures
ADDITIONAL INFORMATION Use of Non-GAAP Financial Measures In addition to presenting its financial results in accordance with generally accepted accounting principles (“GAAP”), including presentation of income available to common shareholders and diluted earnings per share, the Company also provides
Slide 4: Agenda
AGENDA Xia Liu Scott Prochazka Appendix Chief Financial Officer President and CEO • • • • • • • • • • • • • • • • • • Performance and Projections Performance Energy Services and Infrastructure Services Infrastructure and Services Energy EPS Drivers Consolidated Quarter Second Utility Highlights Upda
Slide 5: Second Quarter 2019 Performance
SECOND QUARTER 2019 PERFORMANCE 2019 2018 Q2 GAAP Diluted EPS $0.33 ($0.17) Vectren merger impacts(1) 0.06 0.06 Energy Services mark-to-market (gains) losses (0.05) (0.01) ZENS-related mark-to-market (gains) losses: Marketable securities(2) (0.10) (0.04) Indexed debt securities(3) 0.11 0.46 Q2 Guida
Slide 6: CenterPoint Value Proposition
CENTERPOINT VALUE PROPOSITION • Increasing earnings contribution from regulated utilities through 2019 Estimated Earnings(1) Contribution capital investment to serve our customers 25% • Cash generated from non-utility Non-Utility businesses to support utility capital investment 75% Utility • Continu
Slide 7: CenterPoint to Maintain Investment in Enable
CENTERPOINT TO MAINTAIN INVESTMENT IN ENABLE • Merger with Vectren has increased utility scale and capital needs and reduced Enable’s relative contribution to our earnings • Enable continues to deliver solid performance, while maintaining a strong financial position • Higher natural gas gathered, na
Slide 8: Non-Utility Businesses Generate Steady Cash Supporting Utility Growth
NON-UTILITY BUSINESSES GENERATE STEADY CASH SUPPORTING UTILITY GROWTH $481 $466 $445 $446 $440 $297 $297 $298 $294 $297 $ Millions $ $105 $103 $119 $109 $94 $66 $79 $28 $43 $49 2014 2015 2016 2017 2018 (1) (2) CES Adjusted EBITDA CIS Adjusted EBITDA Midstream cash distribution(3) Note: CES – CenterP
Slide 9: Continued Near-Term Focus Areas
CONTINUED NEAR-TERM FOCUS AREAS Strengthen utility infrastructure to provide long-term customer Execute on merger value integration Manage O&M Execute regulatory spending strategy 9
Slide 10: Regulatory Updates
REGULATORY UPDATES Houston Electric • Rate case timeline Rate base by state(2) – Hearings occurred June 2019 – Initial and reply briefs completed mid-July 2019 7% 8% – Anticipate recommendation from the Administrative Law Judge in late 3rd quarter 2019 6% – Anticipate ruling from the Public Utility
Slide 11: Indiana Electric Generation Timeline
INDIANA ELECTRIC GENERATION TIMELINE Anticipated New Generation Timeline: 2019 2020 2021+ • Q2: All source Request for • Q2: Anticipate IRP filing • Anticipate decision on Proposals (RFP) issued (to (does not require approval) proposed solutions be used as input for the IRP) • Q3/Q4: Potential filin
Slide 12: Environmental Stewardship
ENVIRONMENTAL STEWARDSHIP • Reducing greenhouse gases (GHG) CenterPoint Fixed Assets(1) ✓ Combined company GHG emissions have been reduced Generation annually in excess of 30% per unit of natural gas delivered 3% since 2012, primarily driven by cast iron and other pipeline replacement programs ✓ Red
Slide 13: Agenda
AGENDA • Second Quarter Performance • CenterPoint Value Proposition • Midstream Strategy Update • Non-Utility Businesses Cash Contribution • Continued Near-term Focus ScottProchazka • Key Regulatory Highlights President and PresidentCEO • Environmental, Social and Governance (ESG) Update • Utility H
Slide 14: Strong Utility Performance
STRONG UTILITY PERFORMANCE Customer Growth • Houston Electric: ~ 43,000 customers added year-over-year (1.7% annual growth) • Natural Gas Distribution: over 48,000 customers added year-over-year in legacy CenterPoint jurisdictions (1.4% annual growth) and ~ 1.1 million inclusive of new jurisdictions
Slide 15: Q2 2019 v. Q2 2018 Guidance Basis EPS
Q2 2019 V. Q2 2018 GUIDANCE BASIS EPS(1) $0.03 $0.04 $0.12 Primary Drivers: Enable Primary Drivers: performance(5) $0.06 Businesses Acquired in the $0.14 Merger $0.02 Energy Services Primary Drivers: $0.04 Reduced Income Tax Expense Primary Drivers: $0.17 Merger $0.08 Businesses Financin
Slide 16: Energy Services and Infrastructure Services Adjusted Operating Income
ENERGY SERVICES AND INFRASTRUCTURE SERVICES ADJUSTED OPERATING INCOME(1) Energy Services Infrastructure Services $84 - $94 $63 $66 $66 $56 Six Months $42 $47 $35 - $45 Remaining Six Months Remaining YTD YTD (2) 2016A 2017A 2018A 2019E (2) 2016A 2017A 2018A 2019E $60 $60 $ Millions $ $50 $50 $40 $40
Slide 17: 2019 v. 2018 Guidance Basis EPS
2019 V. 2018 GUIDANCE BASIS EPS(1) First Half $(0.04)(5) Six Months Remaining $0.17 $0.36 $0.26 $0.02 $0.08 $0.03 $1.65* $1.60 $1.70 $1.60 $0.36 $0.29 $0.75 Second Half $2.01 $0.85 $0.81 First Half First Half 2018 Guidance Utility Energy Midstream Other (4) Utility Energy Midstream Other (4) 2019 Gu
Slide 18: Guidance Basis EPS Outlook
GUIDANCE BASIS EPS OUTLOOK Reiterate 2019 Guidance Basis EPS and 5-Year EPS Growth Rate EPS on a Guidance (Non-GAAP) Basis $1.70 $1.60 – $1.70(1) $1.60 Target 5-7% CAGR growth rate through 2023 $1.50 Based off 2018 guidance basis EPS, excluding impacts associated with the merger, of $1.60(2) $1.40 $
Slide 19: Agenda
AGENDA • Second Quarter Performance • CenterPoint Value Proposition • Midstream Strategy Update • Non-Utility Businesses Cash Contribution • Continued Near-term Focus ScottProchazka • Key Regulatory Highlights President and PresidentCEO • Environmental, Social and Governance (ESG) Update • Utility H
Slide 20: Houston Electric – T&D: Core Operating Income Drivers
HOUSTON ELECTRIC – T&D: CORE OPERATING INCOME DRIVERS Q2 2019 V. Q2 2018 $7 $17 $167 $160 $19 $24 $6 $6 $13 Federal income tax expense is also decreased $ Millions $ $143 $147 Q2 2018 Houston TCJA revenue Rate relief (2) Customer growth Other (3) Depreciation and Q2 2019 Houston Electric - T&D Core
Slide 21: Natural Gas Distribution: Operating Income Drivers
NATURAL GAS DISTRIBUTION: OPERATING INCOME DRIVERS Q2 2019 V. Q2 2018 $19 $17 $4 $ Millions $ $47 Federal income tax expense is also decreased $3 $7 $7 $2 Q2 2018 Natural TCJA revenue Rate relief(1) Customer growth Other(2) Depreciation and Jurisdictions Q2 2019 Natural Gas Distribution reduction ta
Slide 22: First Half 2019 v. First Half 2018 Guidance Basis EPS
FIRST HALF 2019 V. FIRST HALF 2018 GUIDANCE BASIS EPS(1) $0.26 $0.02 $0.03 Primary Drivers: Primary Drivers: Enable $0.06 Businesses performance(5) Acquired in the Merger $0.09 Energy $0.29 Services Primary Drivers: $0.19 Businesses Primary Drivers: Acquired in the Merger $0.06 Reduced $
Slide 23: Infrastructure Services Overview
INFRASTRUCTURE SERVICES OVERVIEW • Long-term relationships with customers averages approximately 35 years with top 10 distribution customers • Building on history and reputation with addition of several significant new customers over the past few years • Three construction divisions: Distribution Tr
Slide 24: Infrastructure Services Backlog
INFRASTRUCTURE SERVICES BACKLOG • Backlog represents the amount of revenue CIS expects to realize from work to be performed on uncompleted contracts in the next twelve months • CIS primarily operates under two types of contracts, both of which are generally less than 1 year and consist of fixed pric
Slide 25: Electric Operations Q2 2019 Regulatory Update
ELECTRIC OPERATIONS Q2 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism Additional Information (Decrease) (1) Date Date Date (in millions) CenterPoint Energy - Houston Electric (PUCT) On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Housto
Slide 26: Electric Operations Q2 2019 Regulatory Update
ELECTRIC OPERATIONS Q2 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism Additional Information (Decrease) (1) Date Date Date (in millions) CenterPoint Energy - Indiana Electric (IURC) Requested an increase of $24 million to rate base, which reflects a $3 million annual incr
Slide 27: Natural Gas Distribution Q2 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q2 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy and CERC - Beaumont/East Texas, South Texas, Houston and Texas Coast (Railroad Commission) GRIP 20 Mar-19 Jul-1
Slide 28: Natural Gas Distribution Q2 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q2 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism (Decrease) (1) Additional Information Date Date Date (in millions) CenterPoint Energy - Indiana South - Gas (IURC) Requested an increase of $16 million to rate base, which reflects a $3 million ann
Slide 29: Natural Gas Distribution Q2 2019 Regulatory Update
NATURAL GAS DISTRIBUTION Q2 2019 REGULATORY UPDATE Annual Increase Filing Effective Approval Mechanism Additional Information (Decrease) (1) Date Date Date (in millions) CenterPoint Energy - Ohio (PUCO) Requested an increase of $78 million to rate base for investments made in 2018, which reflects a
Slide 30: Summary of Merger-Related Expenses
SUMMARY OF MERGER-RELATED EXPENSES(1) Quarter Ended June 30, 2019 Six Months Ended June 30, 2019 O&M Amortization of Total O&M Amortization of Total ($ in millions) Expense Intangibles(3) Impact Expense(2) Intangibles(3) Impact Houston Electric - T&D $ - $ - $ - $ 10 $ - $ 10 Indiana Electric - Inte
Slide 31: Reconciliation: Income and Diluted EPS to Adjusted (Quarter)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Quarter Ended June 30, 2019 June 30, 2018 Dollars Dollars in millions Diluted EPS in millions Diluted EPS Consolidated income (loss) available to common shareholders and dilu
Slide 32: Reconciliation: Income and Diluted EPS to Adjusted (Six Months 2019)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Six Months Ended June 30, 2019 June 30, 2018 Dollars Dollars in millions Diluted EPS in millions Diluted EPS Consolidated income available to common shareholders and diluted
Slide 33: Reconciliation: Income and Diluted EPS to Adjusted (Six Months 2018)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Six Months Ended December 31, 2018 Dollars in millions Diluted EPS Consolidated income available to common shareholders and diluted EPS $ 243 $ 0.53 Timing effects impacting
Slide 34: Reconciliation: Income and Diluted EPS to Adjusted (Twelve Months 2018)
RECONCILIATION: INCOME AND DILUTED EPS TO ADJUSTED INCOME AND ADJUSTED DILUTED EPS USED IN PROVIDING ANNUAL EARNINGS GUIDANCE Twelve Months Ended December 31, 2018 Dollars in millions Diluted EPS Consolidated income available to common shareholders and diluted EPS $ 333 $ 0.74 Midstream Investments
Slide 35: Reconciliation: Operating Income to Adjusted EBITDA for CES and CIS
RECONCILIATION: OPERATING INCOME TO ADJUSTED EBITDA FOR CES AND CIS CES CIS Year Ended Year Ended 2014 2015 2016 2017 2018 2014 2015 2016 2017 (2) 2018 (Dollars in millions) Operating Income on GAAP Basis $ 52 $ 42 $ 21 $ 126 $ (47) $ 83 $ 68 $ 56 $ 66 $ 66 CES mark-to-market (gains) losses (29) (4)
Slide 36: Reconciliation: Operating Income to Adjusted Operating Income for CES and CIS
RECONCILIATION: OPERATING INCOME TO ADJUSTED OPERATING INCOME FOR CES AND CIS CES CIS Year Ended Year Ended 2016 2017 2018 2019E(1)(4) 2016 2017 2018 2019E(1)(4) (Dollars in Millions) Operating Income on GAAP Basis $ 21 $ 126 $ (47) $ 89 $ 56 $ 66 $ 66 $ 67 CES mark-to-market (gains) losses(2) 21 (7